EconAir

These posts emphasize the dynamics of economic growth and development, and the role of information in the functioning of modern markets. BASIC CONCEPTS AND THEORY Introduction and Summary     Economic Development and Economic Growth Production Functions and  Supply Chains Demand, Income and Consumption Competition, Strategies and Structure Imperfect Competition: How Large Corporations Compete Case Study:  Parker Hannifin Bilateral Oligopoly Examples of Bilateral Oligopoly Critique of Basic Economic Theory MARKET DYNAMICS AND INFORMATION:  HOW MARKETS WORK Introduction to Information and Economic Structure How Markets Work:  Transaction Costs and Market-Makers Asymmetric Information and Market Prices The Market for Companies:  Acquisitions and Asymmetric Information The Economics of Financial Markets Corporate Growth   Strategies FIND POSTS BY CATEGORY CATEGORIES Market Structure Economic Theory and Markets Market Dynamics and Information:  How Markets Work Demographics

  BALDWIN LOCOMOTIVE WORKS:  A HISTORICAL EXAMPLE OF BILATERAL OLIGOPOLY Baldwin, the largest producer of steam locomotives in the nineteenth century, faced problems typical of a dominant company in a bilateral oligopolistic industry.   A highly cyclical, almost unpredictable competitive environment conditioned almost everything that happened at Baldwin .  A high level of business risk followed from sudden, large fluctuations in demand from railroad companies. This meant that Baldwin often had excess capacity with substantial fixed investment. There were few opportunities for economies of scale.  Baldwin also depended on a skilled labor force with firm-specific knowledge and experience that was exposed to sudden and massive layoffs followed by the company’s attempts to rehire the same workers.  It is hard to imagine a more challenging competitive environment.   Baldwin was a large and dominant firm, accounting for approximately one-third of all steam locomotive production.  The buy sid